Key issues for a better measurement of income and employment Berkeley Hill, University of London

Structure of paper Introduction Accounting framework The household unit Classification of households as agricultural The definition of income Data sources Comments and discussion

Introduction Need for information on household income of farm operators pointed out since 1960s (OECD and others) Few countries have micro data, and little development in sources since 1960s Rising awareness of this critical gap from mid-1980s (led to Eurostat’s IAHS project) Most recently – Court of Auditors and OECD reports have highlighted need

Accounting framework System of National Accounts (SNA) or micro- economic methodology? SNA – established household sector sequence of accounts (including disposable income), consistency BUT only at sector level Microeonomic – more policy-relevant results, distributional issues explored BUT less established methodology, more dependent on data sources

Accounting framework ctd. Recent events Canberra Group report (2001) – micro- economic methodology (not specifically for agriculture) IWG-Agri (coordinated by UNECE) development of Handbook of Methodology for agricultural household income statistics – drawing on IAHS methodology, Canberra Group etc. to be published in 2005

The Household Unit 1 SNA definition A small group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. [The criteria of the existence of family or emotional ties may be added]. SNA definition of household sector is broader than private households

Household unit 2 Most household surveys use the dwelling household concept Dwelling household may contain people who do not pool income and expenditure UNECE Handbook recommends the use of both the single budget household and the dwelling household concepts where possible

Agricultural households - 1 Several criteria of what makes a household an agricultural one Income dependency and labour input are the two most commonly considered Practicality may mean that a reference person system has to be used for classifying Income instability in agriculture has to be recognised (classification using income averaging?)

Agricultural households - 2 Degrees of income dependency are found, from “broad” (with any income from agriculture) to various “narrow” groupings Choice depends on policy circumstances but will affect results (numbers and income level) Agricultural support suggests prime interest in households whose main income is from agriculture UNECE Handbook recommends flexibility

Agricultural Household spectrum HOUSEHOLDS - AGRICULTURAL OTHER HOUSEHOLDS REAL INSTITUTIONAL UNITS Mixed income (Operating surplus) of agricultural LKAUs Other income from independent and dependent activity, transfers etc. CORPORATIONS OTHER Entrepreneurial income from agricultural activity Other EI Kitchen gardens

Difference between “broad” and “narrow” in IAHS results Dk 1996) D 1983 ELL 1994 IRL 1987 NED 1988 FIN 1992 SWE 1992 No. agricultural households (x 1 000) “broad” “narrow” “marginal” Disposable income per household (index) All households100 Agricultural households “broad” “narrow” “marginal”

Agricultural households 3 Conventionally, only household with income from self-employment in agriculture are included (“broad” or “narrow” approaches) The households of people working on large agricultural units in the new Member States are a statistical challenge UNECE and Eurostat’s IAHS methodologies recommend that they are treated as a special optional “add-on”

Definition of income - 1 SNA definition contains items that are inappropriate for microeconomic use Canberra Group provides a microeconomic definition that has some items for which data are very difficult Canberra Group also recommends a more practical simplified list that omits some items important for use in agriculture UNECE Handbook recommends a modified list

Definition of income 2 UNECE Handbook definition (see Fig 1) Net income from self employment Cash wages and salaries Property income received Social transfers received Other regular current inflows LESS current taxes on income and wealth and non-discretionary social contributions = Net disposable income

Data sources Microeconomic data of good quality is essential for reliable income estimates Main sources – farm accounts surveys, tax data, household budget surveys Each has advantages and drawbacks Some countries have no reliable sources, some have several Integrated datasets are very useful (e.g. income statistics registers in Denmark)

Comments and discussion A harmonised methodology is being developed (using IAHS + Canberra Group) Development of data sources is seen as the main limiting factor to providing informatio Data source development will depend on statisticians convincing users (especially policymakers) of the worth of this information to improving decisions, and for them to provide resources